1 Million Missing Shoppers, Leasing Levels Out, The Premium Economy

Episode #1356: Today we unpack the million buyers who’ve quietly exited the new-car market, why off-lease inventory is finally rebounding (briefly), and how America’s new “premium economy” is changing the way consumers spend, travel and shop.

Show Notes with links:

• A million Americans have quietly exited the new-car market and the shrinking pool of buyers is raising long-term concerns for dealers and OEMs alike.
  • Analysts say roughly one million prospective buyers have defected from the new-car market since 2020 as average transaction prices hover near $50,000 and financing costs remain stubbornly high.
  • Pre-pandemic U.S. sales regularly topped 17 million vehicles annually. Now the industry is bracing for about 16 million sales this year with little confidence the old highs will return anytime soon.
  • Instead of chasing volume with discounts, automakers are leaning into profitable trucks and SUVs. Selling fewer vehicles at higher margins has become an unexpectedly comfortable business model for Detroit.
  • “I don’t want to say automakers are OK with this level of sales, but they kind of are.” — Ivan Drury, Edmunds analyst
  • Volvo commercial chief Erik Severinson didn’t mince words: “This is a real threat to the whole industry… people are not able to buy new cars.”

• The off-lease floodgates are finally reopening… kind of. Nearly 500,000 more lease returns are expected to hit the used-car market this year, but analysts say the glory days of leasing still aren’t coming back anytime soon.
  • Edmunds says off-lease volume is expected to jump nearly 26% year-over-year in 2026 with another 400,000 units expected in 2027 as the industry slowly recovers from the leasing collapse of the pandemic years.
  • After 2027, off-lease inventory is expected to level off because leasing volumes never fully recovered after COVID-era shortages and rising prices.
  • Leasing penetration peaked around 29% before COVID but cratered to just 18% in 2022 as inventory shortages and high prices crushed affordability. Even now, lease activity remains well below historic norms.
  • Edmunds says the leasing slowdown is reshaping the used-car business because many mainstream vehicles no longer produce the steady stream of predictable off-lease inventory dealers once relied on.
  • Ivan Drury: “Without a major shift in incentives toward leasing, we are likely to be stuck in this stifled state of leasing for the foreseeable future.”

• Forget the “K-shaped economy.” Some economists say America is now a “premium economy” where consumers can’t afford houses or retirement, but they can afford upgraded flights, better groceries and premium experiences.
  • More Americans are entering the upper-middle class, but home ownership and retirement still feel out of reach for many younger consumers.
  • The upper-middle class has grown from 10% of families in 1979 to 31% in 2024, according to research from the American Enterprise Institute.
  • Instead of buying homes, consumers are spending on smaller “premium” upgrades like travel, concerts and nicer retail experiences. Delta and United captured more than 90% of airline profits last year while Spirit struggled.
  • Walmart has become a major winner by improving stores, delivery and curbside pickup, pulling shoppers away from lower-cost competitors like Dollar General.
  • Hilton CEO Chris Nassetta predicts the economy could eventually shift from “K-shaped” to “C-shaped” as lower inflation and AI-driven productivity help consumer spending “converge” and be more balanced across income levels.

Join Paul J Daly and Kyle Mountsier every morning for the Automotive State of the Union podcast  as they connect the dots across car dealerships, retail trends, emerging tech like AI, and cultural shifts—bringing clarity, speed, and people-first insight to automotive leaders navigating a rapidly changing industry.

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